August 26, 2013

California has more citizens in poverty = 6.1 million, and more children in poverty than any other State. California also has the highest percentage of its population living below the poverty line. According to a new type of Census Bureau calculation that takes into greater account cost of living, California now has a poverty rate of 23.5 percent.

The Public Policy Institute of California has released a statistical analysis of the issue of poverty in California. Among it findings were that poverty rates continue to soar in the aftermath of the Great Recession but have not yet reached the peak of the 1990s Latinos and African Americans have higher poverty rates than other groups and poverty varies widely in with education level. In addition, most poor families in California are working and poverty varies greatly across California’s counties.

A chart was produced that shows the poverty rates in most California counties. Four countries: Merced, Tulare, Imperial and Fresno have poverty rates over 25 percent, and another seven counties have poverty rates over 20 percent. The full report can be read here.

August 23, 2013

This is probably not good news, but avocados from Southern California seem to be getting smaller, at least this year. According to a report by NPR hundreds of thousands of trees in Southern California are producing much smaller Hass avocados than in recent years.

The reasons, they say, is a very unusual growing year that consisted of low winter rainfall in early 2012, erratic bee activity during the late spring bloom period, and lots of unseasonably cool and cloudy weather in the year since.

“I can’t ever remember a season when all the avocados were this small, and that’s over 30 years in the business,” they quoted Charley Wolk, a farmer with orchards in San Diego and Riverside counties as saying.

Consumers generally want avocados in a certain size range with about eight ounces being optimal. This year’s crop is averaging about 30 percent less than that. There is some good news here. The total crop did pretty well, and will probably weigh in more than last year – with about a half billion pounds expected by the end of October. The quality of the avecados is said to be the same with size being most a factor in consumer preference and convenience.

August 22, 2013

The California Environmental Protection Agency has released a somewhat depressing report describing how climate change is already impacting California. The report was issued by the he Office of Environmental Health Hazard Assessment and evaluated 36 indicators of Climate Change in California. Among the indicators they tracked were impacts on physical systems- including sea level and Sierra Nevada snow melt, biological systems – including humans, animals and vegetation and impacts on climate change – such as average temperature and extreme heat events.

Some of the impacts California is already experiencing: reduced spring runoff from the Sierra Nevada, more acidic waters in Monterrey Bay, shorter winter chill periods required to grow fruit in the Central Valley. Ocean warming may have been responsible for a drop in Chinook salmon population during the past decade. Even insects have been effected – butterflies in the Central Valley are emerging from hiding earlier in the spring. Small mammels in the Sierra Nevada have been migrating to higher ground.

Humans are of course impacted also. Since glaciers in the Sierra Nevada have been shrinking spring runoff from snow melt has declined and this affects both Central Valley farmers and hydroelectric plants that rely on this snowmelt to produce power. The less than cheery report warns that we can expect more heat waves, wildfires and higher sea levels.

August 21, 2013

Governor Brown will apparently be taking his economic development plan on the road. According to to a report in the Sacramento Business Journal, representatives of the Governor’s Office of Business and Economic Development, known as GO-Biz. will be on hand to describe their economic initiatives at an event sponsored by several Sacramento Business Associations:

“We’re excited to talk about these updates for economic development in the state,” GO-Biz director Kish Rajan said. “As we’ve seen lately, the Golden State’s economy has been coming back strong over the past year. But with (the governor’s initiative) we now have new, dynamic tools to increase that momentum and put our foot on the accelerator for economic development in California.”

A few months ago, Govornor Brown signed legislation that eliminated the state of California’s enterprise zone program and replaced it with new economic stimulus tools. Those programs include a manufacturing sales tax waiver, a hiring tax credit and recruitment incentives. The full plan can be found at this link.

As described on their website: “The Governor’s Office of Business and Economic Development (GO-Biz) serves as California’s single point of contact for economic development and job creation efforts. GO-Biz offers a range of services to business owners including: attraction, retention and expansion services, site selection, permit streamlining, clearing of regulatory hurdles, small business assistance, international trade development, assistance with state government” To learn more about this office visit: www.business.ca.gov. ”

August 20, 2013

What was once one of California’s brightest stars seems to be having a diminishing impact on the California economy. Cisco recently announced that is will be firing 4,000 employees, even though it has been growing at a good clip and seems financially healthy. As reported by Business Insider, with this most recent announcement, the company has shed 12,000 jobs in just the past two years alone:

“This isn’t the first layoff that Cisco announced this year. In March, a mere five months ago, Cisco said it was firing 500 people. Prior to this new round of 4,000 firings, Cisco had cut 8,000 jobs. So that’s 12,000 jobs gone in the two years since Cisco’s CEO John Chambers began his turnaround”

Cisco employs 74,135 employees worldwide with about 17,496 work in California – mostly in the company’s Bay Area headquarters in San Jose, so this “workforce reduction” represents about five percent of Cisco employees. Little explanation was given, According to a statement given to a Business Insider reporter by a Cisco spokesperson:

“During the earnings call on Aug 14th, Cisco announced actions to align resources to our top opportunities, balance expenses to revenue, drive efficiencies in the business, and invest in growth. These actions include prioritizing R&D, aligning new and existing talent to growth areas and a workforce reduction impacting approximately 4,000 employees, or ~5% of our workforce.”

They also quoted CEO John Chambers as giving the reason for the move in a call with analysts. “We just have too much in the middle of the organization,” he told them.

While this is obviously not good news for the California economy or for the Cisco employees, in financial terms the company is doing quite well. For the fourth quarter, Cisco reported $2.27 billion in profit, up from $1.92 billion, for the year-earlier quarter and revenue was up 6% to $12.42 billion from $11.69 billion.

August 19, 2013

Chinese eCommerce giant Alibaba has continued its relationship with Yahoo and gained another foothold in California with its recent investment in ShopRunner, run by former Yahoo Chief Executive Scott Thompson, Shoprunner is an ecommerce firm based in San Francisco with existing relationships with many major brand names. They are growing fast with orders in 2012 increased two and a half times more than in 2011.

Alibaba, which is planning for an IPO later this year is reportedly paying $75 million for a minority stake in ShopRunner, While Mr. Thompson is no longer at the company, Yahoo owns almost a quarter of Alibaba so some relationship apparently persisted.

This is said to be one of many purchases Alibaba is making in advance of their IPO on the Hong Kong Stock Exchange, that is expected value the firm at $60-$100 billion. The move has not been without controversy. A Hong Kong journalist recently quit her job in a controversy over disputed remarks that Jack Ma, founder of the Alibaba Group, is said to have made in support of Beijing’s violent crackdown on Tienanmen Square protesters in 1989. Mr. Ma denies he said that but the newspaper is sticking to the story and it apparently caused quite a stir in Hong Kong.

Alibaba began in 1999 as a business-to-business portal to connect Chinese manufacturers with overseas buyers. It has since become the biggest eCommerce system in the world, with with sales more then Amazon and eBay combined. The planned IPO will likely secure its position as a global powerhouse in eCommerce for many years to come.

August 16, 2013

Legislation has been introduced by state Senator Ted Lieu, a Torrance Democrat that would allow taxpayer to defer all the profits from selling certain kinds of small business stock.

According to a report in the Sacramento Business Journal, Senate Bill 209, would provide a 38 percent deduction or a deferral of all of the profits made from selling qualified small business stock. This is defined as shares issued by “C” corporations with gross assets of less than $50 million and they must do at least 80 percent of their business in specific industries.

The tax deduction is intended to encourage investment in startup corporations looking for venture capital. The proposed tax break is generous but not unprecidented. Not long ago, California allowed investors to deduct 50 percent of income made from selling qualified small business stock from state taxes, but a court decision rules that this tax deduction discriminated against certain types of investments.

This resulted in some companies being expected to pay retroactive taxes, however the Franchise Tax Board has decided to not enforce this pending legislation to address the issue.

August 15, 2013

While it certainly isn’t news to the people who live in Silicon Valley, the price of housing has sky rocketed there, and my have reached a kind of “tipping point” with news that the average price there is now over a million dollars. For the last four months, the average price of a single-family home in Santa Clara Count yhas been more than $1 million, according to rdata from MLS Listings, a service for real estate agents.

Accordning to a report by NBC news, brokers are saying that tech growth is the main driver of demand in Silicon Valley and that most of it comes from executives at Apple, Google and other established companies. Another big factor, however, is growing demand from China. Realtors say wealthy Chinese buyers are pouring into Silicon Valley and buying up multimillion-dollar properties. They say the buyers are increasingly nervous about the Chinese government and economy and are looking for a safe haven.

Silicon Valley now leads the nation in the number of homes sold for $1 million or more, according to Realtytrac. Sales of $1 million-plus have more than doubled in many communities in Silicon Valley this year, toppling even luxury areas like Beverly Hills or Miami.

August 14, 2013

The world would have probably dismissed it as the rantings of a lunatic had it not been its source. Billionaire inventor Elon Musk Musk – the founder of Tesla Motors Inc.and visionary leader of SpaceX – the world’s first private space company. No one could question his credentials like that, or even say with complete certainty “it will never be built”.

It caused a media frenzy. First, because it was one of those “made for the Internet” kind of stories. Cool technology, a legendary entrepreneurial inventor, a futuristic vision – who wouldn’t want to write about that? First there was the leaking of the mysterious name “hyperloop” – and it was hinted that fantastic speeds would be possible. Then the actual announcement – promoted like a media campaign complete with beautiful artists renderings of the hyperloop vehicles.

As described in a plan he posted online the technology would feature a tube suspended above ground on pylons. Inside the tube there are pods with electric compressor fans. They would move back and forth in a low pressure environment, gliding atop a cushion of air. Something like those phonetic tubes they used to use in banks, but for people.

Musk has been describing it as “equal parts Concorde, rail gun and air hockey table”. He estimated that it could travel between San Francisco and Los Angeles in 30 minutes and would cost about $6 billion to $10 billion to build.

After this exploded on social media, there was a second wave of “it will never be built” pundits but even they seemed to have fun with the idea. That’s ok, it probably will never be built but we all had fun with it, and we all got inspired by this crazy idea.

Mr. Must reportedly got the idea because he must currently commute between his job as head of Tesla in the Bay Area, and of SpaceX in the Los Angeles area. Well that is what startup founders often do right – find an area of personal “pain” or a problem in their own lives that needs to be solved. Most of us don’t need to commute between Los Angeles that often or that quickly. Still, it is fun to imagine what California would be like if that was possible. Would this unite the State? Would this make us more dynamic?

This gave of all a chance to pause for a minute from all the bad news, and ponder a crazy dream. Even if will never happen, it is nice to be reminded that there are still California dreamers.

August 13, 2013

California exports held flat in June, the most recent month when such statistics are available, but given the problems in many economies this is considered to be a respectable number.

California businesses shipped merchandise valued at $15.23 billion in June, according to an analysis of U.S. Commerce Department figures by Beacon Economics. That is up an insignificant 0.3 percent from $15.18 billion in June 2012. “June was another of those ‘apparently up but actually down’ months,” says Jock O’Connell, Beacon Economics’ International Trade Adviser. California’s exports of manufactured items rose from $9.71 billion last June to $9.81 billion this June. Meanwhile, the state’s exports of non-manufactured goods also edged up, from $1.59 billion to $1.64 billion.

According to their report, the data revealed some a few other interesting facts. “While it may seem counter-intuitive, California’s merchandise export trade with Europe has been up nearly 13% over the latest three months,” O’Connell says. By contrast, the state’s exports to the Far East declined by 3.2% during the same period, despite a 16.9% jump in the value of shipments to China.

The Beacon analysis noted that the year-over-year increase was basically canceled out by inflation, the June numbers were up substantially from shipments valued at $13.25 billion in May this year. With imports, California took in $32.03 billion in June, down about 1.3 percent from $32.47 billion in June last year. Since many goods entering California go to other states, so exports are generally considered a more accurate measure of the state’s international trade, which seems to be holding steady.

August 12, 2013

California still leads the nation in wind power generation, but the rest of the country is catching up with wind farms for energy, according to reports released by the U.S. Department of Energy.

According to a report in the Sacramento Business Journal, the nation’s wind power capacity rose above 60 gigawatts in 2012, which is enough to power 15 million homes. In 2012 California installed 1,656 megawatts of new wind power capacity bringing the to more than 5,540 megawatts. California generates about 7 percent of its electricity from wind farms.

California led the nation in development of wind farms for 20 years and it wasn’t until 1994 that the first utility wind farm outside of California opened in southern Minnesota at a time when California had 53 wind farms statewide.

The Department of Energy report estimated that the wind power industry now employs more than 80,000 American workers in engineering and construction and that 72 percent of the wind turbine equipment installed in the U.S. in 2012 was manufactured in the U.S. The full report can be found at at this link: http://energy.gov/wind-report

August 9, 2013

Los Angeles ranked third as a manufacturing employment hub, according to a new survey by the job site Monster.com. This is in spite of heavy job losses in the manufacturing sector with more than 6000 jobs lost in June compared to a gain of about 1,100. Only Houston and New York were reported to have more manufacturing jobs in their metropolitan areas.

It wasn’t all good news though, as reported in the Los Angeles Business Journal, about 47 percent of manufacturing workers were dissatisfied with their jobs, and 34 percent were on the hunt for a new job – and 74 percent of respondents said it was a more challenging employment environment than a year ago.

Still, many believe that manufacturing is making a comeback and Los Angeles is likely to remain a hub for this activity. “With conditions in the US economy turning more favorable for manufacturing in general, there are several indicators that manufacturing jobs are returning to the US” said Jeffrey Quinn, a spokesperson Monster’s Global Insights.

August 8, 2013

The University of California = the largest university system in the world and considered by many to be the most influential will now be making its research results available to the public for free. This decision came after a long battle with the for-profit publishing industry which charges both for publishing articles in journals and then charge again for access to those journals.

As reported by TechCrunch Universities pay millions for access to their colleague’s research, with subscriptions costs up to $40,000 for a single journal and publishing costs many times more for more prestigious closed-access journals. “It’s still ludicrous how much it costs to publish research,” said molecular biologist at the University of California, Berkeley, Michael Eisen.

The San Jose Mercury News reported that the policy will apply to 8,000 faculty members and roughly 40,000 papers they produce each year “on subjects such as planetary magnetic fields, modern Israeli fiction and a host of other topics”. Legislation approving this initiative passed the California Assembly in spite of significant opposition for industry lobbyists, but the fate of the bill is largely irrelevant as the UC system has taken the matter into its own hands. “Taxpayers pay for this research, and we the people, we own it,” said Mike Gatto, D-Burbank, who co-authored the bill with Republican Assemblyman Brian Nestandet. “So it just makes sense to cut out the middlemen who charge taxpayers for something we already own.”

The “Open Access” movement already had signification momentum. The White House is on board and has pledged a significant $100 million to promote open access and to require all federally-funded research to be free of charge. More than 175 research institutions around the world have approved similar initiatives including Duke, Emory, Princeton, Wellesley and the University of Kansas and some schools or departments, such as the Harvard Business School and the Stanford School of Education, have also joined in. With the University of California now giving its stamp of approval, open access may now become the “defacto standard” for public research throughout the world.

August 7, 2013

Seed venture capital funding in the San Francisco Bay Area will set a record this year, according to a report issued b CB Insights – an industry research group.

There have already been 242 deals in the region, with $192 million invested, the report said. That is more than what was invested in all of 2010 and is already nearly equal to activity in 2011.

The report indicated a shift in the awarding of seed funds with Internet seed deals dropping below 2012 levels while Mobile seed deals increasing dramatically – double what they were in 2010 levels and already equal to was invested in the sector in 2012.

The research firm also listed the top 10 most active seed investors in the Bay Area. In order the are SV Angel, Andreesen Horowitz, Google Ventures, First Round Capital, Charles River Ventures, True Ventures, Founder’s Collective, Felicis Ventures, CrunchFund, New Enterprise Associates and Floodgate Fund.

August 6, 2013

Spacex, a private sector space exploration and technology company based in Hawthorne, California, has been awarded a contract for Canada’s largest space program.

The program is the ADARSAT Constellation Mission, which is designed to provide maritime surveillance, disaster management, and ecosystem monitoring capabilities. This wil provide Canada with the ability to monitor polar ice conditions, oil pills, ship movements, forest fires, wetlands and coastal changes.

The contract with Canadian space company MacDonald, Dettwiler, and Associates will transport three satellites to orbit in 2018. “SpaceX appreciates MDA’s confidence in our ability to safely and reliably transport their satellites,” said Gwynne Shotwell, SpaceX President and COO. “We hope this agreement is the second of many with MDA”, the company said in a press release.

SpaceX designs, manufactures and launches advanced rockets and spacecraft. The company was founded in 2002 to revolutionize space technology, with the ultimate goal of enabling people to live on other planets.

August 5, 2013

The White House has given an award to the California Centers for International Trade Development (CITD) in recognition of their contributions to the increase of U.S. exports.

The Presidential “E” Award was created by President John F. Kennedy in 1961, to recognize persons, firms, or organizations that contribute significantly to increasing United States exports. The Department of Commerce’s International Trade Administration manages this award program and has recognized more than 2,500 firms since it began. The award was presented n Washington, D.C. to California Community Colleges Board of Governors member Dr. Debbie Malumed and Jeff Williamson, CITD’s statewide director.

There are nine Centers for International Trade Development across the state. The centers are supported by grants through the Chancellor’s Office’s Workforce and Economic Development division. Programs are in place that provide industry-specific education, training and services contribute to workforce development.

“It is programs such as the CITD that are strengthening the economies of local communities, creating jobs, and contributing to the worldwide demand for ‘Made in the USA’ goods and services.” said U.S. Acting Secretary of Commerce Rebecca Blank on conferring the award.

August 2, 2013

California movie studios haven’t been paid for movies shown in China since late last year, according to an exclusive report by The Hollywood Reporter. This situation only gained wide attention recently because because China will likely become the largest moviegoing market in the world before too long and the studios have been quiet about it because they want to preserve the relationship

The dispute apparently centers on a new two percent value-added tax that the Chinese want the studios to pay. For their part, the studios claim that the additional payment would violate a World Trade Organization agreement that was made just last year between the U.S. and Chinese goverments.

According to the Hollywood Reporter estimates: Warner Brothers is owned about $31 million for Man of Steel, The Hobbit: An Unexpected Journey and Jack the Giant Slayer; Sony is due about $23 million for Skyfall and After Earth ; Paramount would be owed roughly $30 million for Into Darkness, G.I. Joe: Retaliation and Jack Reacher; Disney’s Iron Man 3 made more than $121 million in China, which would mean a return of more than $30 million for the studio, while Oz the Great and Powerful would mean about $5 million in payments.

Several other movies are in he middle of their run, and some studios are still owed money for 2012 titles as well. For example, Fox hasn’t received payment for Ang Lee’s Life of Pi, a check that’s expected to earn about $23 million.

Movies are, of course, one of California’s primary exports, and in a country where bootlegging and copyright infringement is commonplace, it is difficult to understand China’s justification for withholding payments. If the situation was reversed, and California suddenly decided to stop payments for Chinese manufactured goods, it is hard to imagine that it would be considered acceptable by the Chinese. This seems like a case where China is using its market size leverage to an unfair advantage, and it is certainly something trade officials and policy makers should keep an eye on.

August 1, 2013

The University of Southern California has release an analysis of immigration reform that suggests that authorization and citizenship for undocumented immigrants could lead to improvements in the state’s economy. The analysis reviewed two studies: a report by the Center for the Study of Immigrant Integration (CSII) that estimated that immigration reform would pump about $4.6 billion into California’s economy, and a report by the Center for American Progress that estimated about 8 billion would be added to the California economy through immigration reform.

While small compared to the total size of the California economy, there is thought to be a multiplier effect as these many of new citizens will be of lower income and will be more likely to spend their paychecks than to save them. According to the report, social issues should also be considered: “children of undocumented parents face greater barriers to accessing social services and programs and tend to have more negative social, economic and health outcomes.” About 1.5 million children in California live with at least one undocumented parent, which is an amazing 16% of children in the state.

In order to possibly curb the negative social, economic, and health outcomes these children tend to face, the report emphasized that the state should begin by legally incorporating their parents and reforming immigration law in a way that that grants them greater economic opportunities. The Study concluded that immigration reform could economically benefit both the undocumented immigrants and the state’s they call home. The full report can be read at this link: http://csii.usc.edu/documents/whats_at_stake_for_the_state.pdf.

July 31, 2013

Small companies in California have had a far greater impact on job creation than previously estimated, and this has been going on for an number of years. According to an analysis issued by Small Business California, businesses with less than five employees, sometimes called “microbusinesses”, were the state’s main engine of job growth between 2003 and 2010. These firms added 719,729 positions over that time period, while all other small businesses lost a combined 460,368 jobs during the same time frame.

California’s microbusinesses added jobs even during the depths of the recent recession, creating 120,818 positions between 2008 and 2010. Larger businesses, including firms with more than 500 workers, lost a combined 1.02 million jobs in those years. The report was based on an analysis of data from the U.S. Small Business Administration, Office of Advocacy and can be viewed at this link http://www.smallbusinesscalifornia.org/1.pdf

It is possible that the role of microbusiness has been far greater than previously estimated and this should provide some serious food for thought for economic development professionals and those responsible for business policy formation in California.

July 30, 2013

Cisco Systems, the worlds biggest maker of networking equipment has agreed to acquire Sourcefire Inc., a cybersecurity firm, for about $2.7 billion in cash.

Sourcefire, based in Columbia, Maryland, builds security platforms including firewalls, intrusion detectors and malware protection that is used extensively by the U.S. Government and major corporations. The company was founded in 2001 and has grown into a major cybersecurity provider – last year it had revenue of over $200 million.

According to a report in Bloomberg Markets Watchlist, many of Sourcefire’s products are built on Snort, an open-source program developed by Sourcefire founder Martin Roesch. The system is used by most Fortune 100 companies and 30 of the largest U.S. government agencies to detect attempted attacks on their networks. Sourcefire’s business with the U.S. government is a “very valuable” part of the deal and will give Cisco more access to key federal cybersecurity decision-makers, according to Christopher Young, senior vice president of Cisco’s security group.

The deal is Cisco’s biggest since its $5 billion acquisition of NDS Group Ltd. last year and is thought to reflect a growing interest for companies that can help guard against computer-based attacks by governments and corporations.